tv Key Capitol Hill Hearings CSPAN July 4, 2014 4:00am-6:01am EDT
corporate and commercial law and now there's amtrak so these things have a life cycle. but if ryan is defining cyber law as a set of tools and an approach to problems and a focus on technology, then robertics not only not the new cyber law. robertics is a subset but cyber law is a state of mind and starts to look like a methodology which is in some tension with what i said but the research agenda goes away and the fields change and end. >> but we're all being pragmatic or what jack called in his book, we're making due with the tools at hand to try to muddle through problems. >> ken anderson.
not because i was too young but i'm not sure what i was, so i just remember sort of vaguely coming to law and this was like this cool area, jamie boil is a very close friend and it seemed like he was just intellectually playful and too cool for anything that i did. david you note the sense of sort of gee whizness. it's the most attractive thing to me coming from fields where the general action is pistols at dawn. so this is in some sense a very strange conversation about the future of this field that has a certain sense about staking ownership intellectually in the next camp. and ryan, i think that you know that i'm the biggest fan of this paper i've been pushing to kind of everybody, but i
believe that if we get swrout side of the conversation with the people who are part of the cyber conversation from before which notably everything here is really focused on, i think that the part of the paper that's going to be the most lasting in terms of generating the basic ideas about these new conversations is going to be your identification of embodiment emergence and social meeting. and that those are going to be the discussions. and i would actually suggest separating out in sort of future things those two conversations because in a sense you really are addressing different audiences. and what grabbed me so much about this papeser precisely your articulation of the features that made this different from cyber, that made this different from automation, that made this different from these other areas and said something to me about what's going to make this an area
which because these things are coming into social life are going to wind up requiring that we address the social regulatory legal ethical all those questions. and frame that in a way that i think is going to be different from cyber but i don't know. i wasn't back there in 1995. and you were in junior high school. i mean, did you have to get permission? sorry that was uncalled for. >> very useful. >> and i'll just finish on this. i think that cyber at least to me looking backwards and listening to people talk here felt like that this was an empty untamed shapeable, and that the metaphors one chose would become the sort of things which planted themselves and
all that stuff. i think the biggest difference is going to be that for the reasons you articulate better than any article was done, that's not going to be the case for embodied machines coming into people's homes, into nursing homes, into all these facilities where we have an awful lot of concepts as you state about what happens when the robotic arm turns and whacks grandma. and it's not a sort of unclaimed space out there. and moreover it is not an unclaimed space in which we kind of by fiat decided that it would be governed by contract principles with an enormous sort of privileged space for consent and no damages. and that will not be the case i imagine because i think that the primary defining body of law, and this is going to be tort and products liability and
all those kinds of things. so i think it's about the confrontation about the space that's largely already occupied because we're talking about the physical. >> i guess i just wanted to say quickly, i sort of -- i was with ken about halfway through. i think his suggestion about the paper that part two is really an important -- really important contribution to sort of help set the parameters, if you will, of something or at least begin the conversation of what the parameters of this field are and is it exceptional. i think he's right about that. i'm not sure i -- i do think this could be i guess i have no reason for thinking yes or no, one of the those times when you plant the metaphors as you say and they grow and they matter. the law -- you know, the law of the horse was one of those for cyber law code is law is
another one. they sum rised important -- set the path. everybody knows about them and talked about them. i think the opportunity is there for the same thing to happen here. but we shall see. next. sorry next question. >> so, once again, neil asked a similar question. but i want to comment more on what michael said because ings he brought up a really interesting point. so i teach media law and for a long time i taught social media law. now the more i say that word the less it seems to make sense because of course all media is now becoming social and integrating in. and michael made this point very eloquently. it reminded me a quote weird al yank vick was asked dour field you're going to become unpopular? no. as long as there's culture
weird al yank vick is going to be around. >> i wonder if there's a new framing that we've been missing in all of this because it seems as though everyone is right here in a certain sense. so there are unique things about cyber law and there are unique things about robot law but inevitably they will become assimilated. is it possible that new framing could be something like law and the assimulation of technology? because that's really what we're talking about. and in that way it goes on forever. for whatever we're grappling with, like pop culture we can always be asimulating new technologies. so i just throw that out there. >> like the bourk. >> exactly right. kind of like the big umbrella. that's a the way a framing that we can call upon to keep this going and maybe we keep from
talking past each other on certain things. >> and so in a totally underdeveloped part of the paper i should say to be really clear i try to suggest something like this by saying is cyber law the law of the internet? or is it a way by which to absorb new technologies. but i actually like your idea of framing the whole thing that way. and i say if so then i even say for a second, you know, maybe we even suggest a meth odd oming here to do that. and that is what are the essential qualities of this new technology? what new experiences does it create? and then how does that differ. and so i like that frame and i think that rather than just sort of refer to it in passing i might shape part 3 that way. >> so i want to throw a monkey wrench into this. i have the opposite opinion of
what i think was just said. i think we need to be a little more critical about the mon i can yers we throw out there for potential self-interest as a community. and think about the field versus institution that is we need in order to advance the thoughts that come out of that area. so robertics incredibly important. cyber law incredibly important. but as many people have now eluded have now been immersed pretty much into existing fields. so the monkey wrench that i'm trying to throw in is do we want something for institutional purpose ors do we want something to advance the fields and be understanding thereof. and so writing on what i do mostly is autonomous weapons systems. i'm sort of wonder everything that's been styled robot at
this conference doesn't strike me necessarily as what i would think of as robots. right? so i would throw that in addition and say is maybe one framing device autonomous? and i think even i heard you say that. and to me robots are nice but a lot of the things that for example was on the questionnaire yesterday through a lot of -- threw a lot of stuff together. and know they was done on purpose. but what do we think of when we saw say robot law? do we mean the i phone and the switch on the wall to turn the light on or do we really mean something different? and i think i would like to hear a although little more in the paper discussed and fleshed out maybe in that way. i don't think we've ever talked about car law in that same way
because it was immediately looked at as a way of looking at the fields that were most relevant and i think i will leave it there. food for thought. >> i'll take that as very good food for thought. i mean, i do struggle with like how do we define this stuff and why should we. and -- but i do think that one level like sort of a lot of what we do is academics, falls into one or two categories sort of like all general intelligence. show how two thing that is really look the same are different or show how two things that really look different are the same and you sort of pick the things you're going to do or do both. but i need to address that better and i appreciate the comment for sure. >> i think from a clock handler this will be the last words. question at least goes to you. >> fittingly to you.
>> very nice. when i came up here i came up here to make remarks largely echoing what ended up being kenneth anderson's remarks about the strength of the paper as in locating a set of key distinguishing features here that really merit what david described as having our own boat. and i really think that obviously an essential contribution and it will be a lasting contribution that comes from this paper no matter what the final format of it was. but since kenneth had already talked about that, i was reflecting auto buy graphically because so many of us have been standing from the law of the horse comment and moving forward, i remember as a fairly young academic in 1998 and 99 being commissioned by one of canada's law reform bodies to write a study on whether
software bots could enter into contract. that was a question which was unanswerable at the time. and i think that the law reform commission was correct in sort of deciding to give it to somebody who is working on what i was working on in those days rather than a contract law scholar. i think if a classical contract law scholar for example my former mentor who writes the books on contract law in canada had been given that question he would have fundamentally gotten that wrong for whatever else the rest of us struggled through. that paper incidently, tweeted about because it has to do with thinking about intermediaries as agents. which was part of our discussion today. i guess the auto bige graphicle reflection that i have in sort of thinking through this is at the time i remember i had just moved from the university of western ontario to ottowa to
join my incredible colleague michael geist who we had been talking since the beginning of our careers about our role in this discussion in this space. he chose to call his course e commerce law. i chose to call mine internet law precisely for the reason that is michael worried about that his course would be commerce. and but still, even from the moment i was asked that question about the software bots, i guess i considered that while michael was teaching cyber law, i was teaching cyborg law and something about the merger of humans and machines, which is how i saw the issues that i was dealing with suggested distinctions from what cyber law was trying to do that raised new and emerging questions and i think very beautifully characterized by the kinds of description that is ryan gave particularly in part two. so i guess at the end of the day mine is more of a comment
since ken took my original point. which is to say that i tend to agree with david that there may be a value in thinking of two different boats. but the question regardless especially for people in the room who aren't law scholars and so don't worry about what subfields in law are, we all know that categories matter. and there's important things that hinge on how these things ultimately become understood. so for that reason in addition to all the others i just wanted to commend ryan on what i think is a beautiful paper. >> thank you. >> so as the chair of the conference i can't resist making one last comment. look at your program, we have this lovely graph. you also have a line under there which tells uzz what
we're about, which is legal and policy issues relating to robotics. and for those who are not lawyers, i want you to encourage to think first that the policy issues are, have equal place. we'll see that in the conversations this afternoon we'll be talking about automated law enforcement, about the civil regulation of drones and also, this here is law professor talking, if you want to make policy that's fixed and be enforced do it in conversation with your lawyers. maybe you tell them what you want to achieve but you need them as your agents as well. now we get an hour for lunch and then we'll be back here right on schedule. great panel. [applause] .
here at the wilson center, and i want to welcome everyone on behalf of jane harman the president, director and ceo of the wilson center, who is out of town at the moment but she wishes she could be here because this is going to be a really interesting and important session. it's interesting and important both for what you'll hear today and because this is the inaugural session of what will be an ongoing seminar series looking at energy issues in different regions of the world with. we hope to have the series continue more or less on every other month. and one of the reasons for doing this is because, obviously energy is a golden word. we are just talking about how unlike say, imperial russian law, energy will fill a room in washington.
and there are real reasons for that because the issues we're going to talk about very much will affect how we all live our lives. so it's important for us to be adding to the conversation about energy and to do so by building on the wilson center's strengths, by focusing on regions around the world and bringing in the regional dimension. this series and this book comes from a book which is really the brain child of one of the panelists who's here and has been affiliated with the center for a long time. and he's been the animating force behind a number of center activities and for the book that's on sale outside, "energy and security." and this is the second edition of the book. i think the first edition was about the bestseller from the wilson center press.
i tell you about because there was a book on terrorism that runs equal with it. [laughter] but it's obviously, this is an important topic, and jan has always assembled for panels like this wonderful experts. so we're fortunate to have jan with us. he was at chevron for 13 years, eight years in the clinton administration. and we're also very honored to be joined by this very distinguished group of very senior people including a nsc director, and it'll be, i'm sure, a wonderful, wonderful panel. so with that i'm going to turn the chair over to matt no january sky -- row january sky, and in doing so, i want to thank matt and his staff for pulling together this session. as always the staff has done a wonderful job. matt, it's all yours. >> well, thanks very much blair. i am not, in fact, carlos
pascual. quick who has not yet figured that out -- anybody who has not yet figured that out, you might be in the wrong room. i think part of while -- why we're all here is because of the experts who have written for this book and who have helped the wilson center really to make a mark on the issue of energy. i'm particularly grateful to jan, to david and to julia to give us this kind of content at a time like this, because i think it's of particular concern that not everything be understood through the lens of the current conflict the current tragedy, the current fascinating developments in ukraine, but actually understood on its merits on a deeper level in some cases in a very technical way in order to be able to grasp what may happen in the future including in connection with the crisis in ukraine. so we won't shy away from that by any means, but i think we
want to try and take a broader look at the same time. the kennon institute is the wilson center's oldest program. we celebrated our 40th anniversary this year. we have over 400 alumni throughout the russian federation, more than a hundred all throughout ukraine including, by the way in crimea. and we're v s, i don't think about power lines, i don't think about environmental impacts, i think mostly about modernization. pause -- because the
psychological key for development and for political success in this entire part of the world is modernization. and energy so central to that issue that i think it's almost become a part of the psychological lexicon of politics and of people throughout the post-soviet space. russia is certainly no exception. be i think the panel today can address some of these questions but i'd like to put them out there. is there a change now with the emergence of a new connection between ukraine but also moldova and georgia to the european union? is there a change fundamentally underway in the dynamics of energy development and modernization in the region? are we beginning to see a real cleavage that is going to have real impacts? or are we seeing a temporary blip? will it be just about sanctions until a political deal with reached and then flows will return to normal in every sense? what in the longer term is the
positive vision for energy in this region? how can energy be something other than a weapon an interruption and an inadequacy of the system? and then, of course are we going to, thanks to the politics which continue to become more and more and more complex rather than less every day -- i think we're seeing that now as mr. boar schoen coe has just relaunched the military campaign in the east of ukraine -- are we going to have the time necessary to make the right kinds of decisions about energy be issues in this region? i think the panel can shed light on all of those questions, and so my first privilege is to introduce jan who will lead us off. jan is a former counselor to chevron corporation, so he knows something about energy and, of course editor of the volume "energy and security." jan? >> well, thank you very much, matt, and also blair for the kind introductions. and it's a great pleasure to be here with my friend and
co-editor, david goldwin. we spent many long hours working together on the book and my co-author for the chapter we did on russia and eurasia and my very good friends john buyerly and bill courtney. sort of like old home week looking at the audience, too, i see a lot of old friends. i'm delighted that you were able to come and join us here. let me just say a few words about the ukraine crisis as a way in the context of how it interacts with energy issues, and then i think david will start from the rubric of the book and tackle it from the other side. in ukraine i guess many feel that the immediate crisis may be on its way to stabilizing, but the long-term issues remain. for one, sovereignty, you know, does russia's annexation of crimea stand? does so-called autonomy mean
russian hegemonny at least over eastern ukraine? second eastern retrenchment which seems to be the russia's russian path at least for the time being. instead of western engagement which seems to be the chosen path in ukraine subject to what happens from day-to-day. every day a new development occurs. nationalist forces are on the rise in russia as in other countries, and opportunities for cooperation, i believe will narrow to those where interests very much coincide. so an expansive view, i think one has to be pretty skeptical about. and third, and this gets to energy in russia and ukraine. energy is not just a commodity it's really an economic life preserver and a crucial instrument of influence. and i think it's important to recognize that while we may have a market view of energy from the western perspective, it's very much a power political view from the eastern perspective.
americanly, i am skeptical -- personally i am skeptical that we can expect the situation to do more than stabilize in the near move future but that is still meaning. violence can diminish kiev and moscow can return to their own national and regional agendas. regionally, russian tolerance of kiev/e.u. agreement can help open an opportunity for genuine reform and ukraine's becoming a bridge rather than an orange wedge, a southern finland, if you will. and perhaps president poroshenko will achieve reforms if the oligarchs stick with him if he can secure interregional support in this country and if the e.u., u.s. and imf put money where our mouth is. otherwise as the chinese say, big noise upstairs nobody coming down. and that is very much a
possibility given the nature of western behavior which has been lots of rhetoric some sanctions which are, you know a very specific, targeted area but not much in my view of a larger strategy. and that is where the role of energy, i think, becomes very important. i'm reminded that the prime minister of the u.k. said recently we have to realize that energy is not a fifth level consideration, it's a first level consideration. and i'm glad that our european friends are coming to that conclusion. we, some of us here in this town have been feeling this for quite a long while, and i'm glad that there's some statement to that effect over there. so what about this role? i'd say it's crucial but in the past it was crucially negative and in the future it has to be crucially positive. in the past, corrupt middlemen
siphoned off with gas revenues ukraine's gas came at exorb stand prices and russia pressed ahead with alternative pipelines to completely circumvent ukraine. the question in the future is whether ukraine and we can reverse these trends. this implies a concerted everett to replace -- effort to replace overpriced russian gas to overhaul ukraine's domestic gas system and to push back against russia's anti-ukraine pipeline policies. pretty tall order, for sure. is statesmanship possible here? theoretically, yes. energy could reinforce ukraine as a bridge rather than a wedge, and i think at least two elements will be needed. first, energy debt rescheduling by russia as part of an imf loan and reform package. and relatedly pause they can't go -- because they can't go just on their own replacing the zero
sum pipeline game with a plus-plus alternative. for example ukraine, russia and the e.u. could each invest in one-third of ukraine's trunk pipeline with a golden share held by the state company. these are really big challenges and i'm not pretending this is something you do by tomorrow or the today after tomorrow. the day after tomorrow. and in the past the small leaders -- which i think, basically, they were especially in kiev -- were not up to these challenges. but one is always hopeful and i am an optimist and i think that better leadership is possible. and certainly we can't do worse in kiev. and be crises have a way of forcing leaders to make braver decisions. russia will require, i believe, greater cooperation with the west over time. ukraine and should be part of
this perhaps inevitable new agenda. so just to conclude i'd say that numbering is a key to -- energy is a key to the strategy for ukraine and russia and vice versa. and after david speaks to the other half of this framework i look forward to hearing from john and bill and julia. it will help us figure out, hopefully, what such a strategy might look like. and i would like to say again how pleased we are to be hosted by kennan which is such a major part of the wilson center's history, and it's a delight to start with this at a timely point given the issues we're facing. thanks. >> david is a former state department special envoy for energy and is the co-editor with jan of "energy and security." please. >> thanks matt. thanks to the wilson center, to all of you for coming. in this book that jan and i put together with all these terrific authors, the title is "energy and security strategies for a world in transition." and two of the primary themes are that the technological
advances in the u.s. the shale oil and gas revolution, has changed the position of the u.s. in the energy space both by its relative abundance, by being a leader in technology and by being less of a demander on the world in terms of energy which gives us more status, i think, to talk to others about change. and we really make two primary points. we make a few, because it's an 800-page book. we have the opportunity to make the energy world more resilient by propagating this technology overseas, by connecting u.s. oil and gas abundance to the international market making oil and gas markets more competitive themselves, by using our role in international financial institutions to make other countries more attractive to energy investment so they can be more self-sufficient. and that we can leverage the fact that many producers are now also big consumers; saudi arabia for one. and a lot of consumers have common cause with us and price stability. so we have a little bit more
diplomatic capital than we did. that's kind of point one. point two is while we have the ability to make this pivot in our policy and to use energy not as a weapon, but as a force multiplier or a tool or at least as part of our kit to make change and help other countries be more resilient, it's unclear whether we will. it's unclear whether we can manage promoting the development of energy overseas and support for climate change. it's uncertain whether we can utter the words "natural gas" in a policy statement, you know, coming out of the white house and say that we actually want other countries to develop it rather than we want to make the world more resilient because we're using less and they'll have more. so it's unclear s. so the question as it affects russia and ukraine and i would say europe and the caspian too is are we doing all we can with all that we have to maximize this advantage. and i think the short answer to that is no, not yet. and what i hope we'll talk about today is what our ageneral da should be for europe -- agenda should be for europe.
you can't move gas from point to point. are we doing enough as the united states to move europe in that direction? is europe doing enough for itself? development of shale gas. a lot of the opposition comes from gas -- [inaudible] some of it comes from energy giants who will be unnamed in western europe who conot want -- who do not want to give up the relationships they have with you should russia. are we doing enough to advocate for the promotion of indigenous gas in europe and to deal with the environmental consequences in a direct way, or are we too embarrassed to talk about it? with respect to countries, ukraine, i would say poland and some of the others, are we doing enough as the united states to promote internal economic change in those countries to leverage market reforms so they have a pricing system that somebody might want to invest in? again, i think we're not doing enough yet. i think a third category that we have to look at is whether or not we are doing enough on our own to connect to markets, you know? exporting lnq or export -- lng
or exporting crude oil, but when we compete with others, we make markets more competitive. we're the only country in the oecd that restricts the exports of numbering, and we spent the last 35 years telling everyone else to develop all they can. maybe this is not sustainable. maybe we should take a look at this. but i think when we're dealing with these kinds of crises, we have to ask ourselves are we doing enough on on this agenda to promote this? and want the caspian as well? ambassador courtney will address this in his talk, but they're probably wondering where that policy is right now. i think we've done important things. we are helping ukraine with shale gas, with internal reform, we're helping them some on debt. but if the strategic option is to make energy less profitable for russia and investment in russia less attractive and provide diversity of supply for europe and diversity of supply for other countries, there's a
whole lot more on our agenda that we could that we're not doing, and hopefully this morning we'll talk about what those steps might be. >> thank you very much david. and thank you both for keeping to our strict time lames. ambassador -- limits. ambassador john byerly was former u.s.word to the russian federation and to bulgaria. john. >> thanks matt. it's great to be back here at the wilson center again, and, like jan to see so many familiar faces and committed experts. it's always a little daunting to talk to a crowd like this about russia. i think what i'd like to try to do is we'll talk a lot about energy today. i'd like to maybe just pull back for a minute and look at the general context of the relationship, the troubled relationship between russia and the west, russia and the united states, russia and europe. and then hone in on a few aspects that i think make this crisis feel a bit different and
then bring it back to the energy side. there's a temptation for those of us who have been doing u.s./soviet, u.s./russia relations for most of our careers to see any dispute between russia and the west as just the latest in a series of cyclical down turns which are almost inevident write followed by up-- inevitably followed by upturns. and i think more importantly there's always been a tendency or an inclination over the last 20 years since the collapse of the soviet soviet union, to see the strategic paths of russia and the united states, russia and europe russia and the west as more convergent at the end of the day than divergent. for many, many decades those of us who were in the business of writing talking points including bill and david and jan wrote many times the talking point that we want a relationship between the united states and
russia where we can contain our inevitable disagreements and prevent them from doing damage to the areas of the relationship where we have common interests, where we haved shared views where we have good cooperation. this was never an overwhelming consensus on either side for the last 20 years but at the end of the day it was usually the argument that won out. and so i think one of the central questions that we need to be asking now whether we're looking at the energy question or regional conflicts in which we'd like russia to work with us is can we still agree that these two countries are on convergent trajectories, or do we see these convergent trajectories as achievable. or some people would say even desirable anymore. for me this current downturn this current crisis over crimea over ukraine feels quite a bit
different than previous ones that i've experienced in my time working in the soviet union and with russia. and i would point to three quick factors that make it feel different. the first is the scale of the economic ties between russia and the united states, russia and the europeans and more importantly, the willingness of the americans and the europeans to use or threaten the use of sanctions as a policy tool. this is much more salient now than it was even five years ago when we had a downturn over the actually, a crisis in the relationship over georgia. the u.s./russia trade relationship hit a high water mark in 2012 of about $40 billion, but that's only one-tenth of what the russians trade on an annual basis with the europeans. so the stakes are very, very high at this point.
and we used to talk, i used to talk when i was ambassador about how the trade and investment relationship between the united states and russia could serve as something of a shock absorber. it could modulate those inevitable ups and downs in the political relationship that we live through over the years. i think we have to look at that in a different way now, because the size of the economic relationship makes the economic relationship in a way more of a potential hostage to political ups and downs than maybe we thought before. so the economic relationship, the scale of it certainly makes this crisis feel different than previous ones. a second factor is the very complex political context that pote the europeans and -- both the europeans and the americans are working at as we formulate and implement our policies. here in washington that statesmanlike-consensus that used to exist that foreign policy stops at the water's edge, we need to work together
i would say the situation is worse in russia with the duma and the federation council and their views on we've got a problem peans to forge a consensus inside the european union and the commission lead to lowest common denominator solution. none of this engenders respect in russia. so that is the third problem. this makes this crisis feel to me less like a cyclical downturn and more like a signal after fundamental divergence is the growing strength in russia of this persuasive national idea, i don't like to call it ideology but you can use that word if you want that questions utility of partnership with the west and rejects western values and institutions as any kind of a model for russia. now we've seen this happen before in russian history as russia turns away from the west
and approaches with the west at some point but it has never happened before at a time when factually russia is as integrated into dependent on and open to the west as is the case now in russia. so it feels to me very much like there are two trajectories inside of russia right now and it is discouraging for me to see how much of that new national idea is founded on a mythology that the west and the united states want to weaken russia. a weak russia, in my opinion and the opinion of everyone i know who does policy on russia, europe and the united states, a weak russia is our worst nightmare but working with russia to make it stronger and to find especially through energy cooperation a way to have russia prosper and become more integrated into the world economy is really the name of the game and i hope we'll be
able to dig a little deeper into that in the next hour or so. >> thank you very much, john. bill courtney was u.s. ambassador to kazakhstan and georgia. bill. >> thank you very much. let me comment on the strategic context affecting what i will call the three energy baby giants to the south of russia, azerbaijan kazakhstan and turkmenistan. in the years ahead strategic environment in this region may undergo dramatic change. the first source of change is china. in 2011 its gdp was 4.7 times larger than russia's. the imf estimates that in 2018 only seven years later china's gdp will be six times higher than russia's. leveraging this economic dynamism, china is investing in energy and in kazakhstan and turkmenistan. china has already broken russia's monopoly over energy
export pipelines from central asia. oil and gas flow eastward over long distances to china. last year chinese leader ping visited central asia and signed tens of billions of dollars in commercial deals. china is challenging russia's security real. xiping proposed a central mechanism for central asia focused regional organization. central asia and russia offer china sources of energy not vulnerable to interdiction by western navies. in this way the u.s. military rebalanced to the asia-pacific is benefiting kazakhstan and turkmenistan. the second source of change is russia's ebbing relative power combined with tactics that alienate. russia has long abused its control over energy export pipelines, squeezing land-locked kazahkstan and turkmenistan.
in 2009 russian saboteurs blew up pipeline which turkmenistan exports bass. the kremlin opposed the construction of the oil pipeline which takes oil from azerbaijan to turkey bypassing russia. russia is asking neighbors to join the your asia economic union. they are grumbling about the higher cost of imports and elsewhere. emboldened by its seizure of crimea russia might conceivably opt to interfere in for kazakhstan where several million ethnic russians live. russian revoltists might see urgency acting before china's growing influence in kazakhstan makes russian intimidation less feasible. another risk to the baby giants is russia's naval buildup in the cast pian sea. in april russia's cast pian sea
flotilla called a snap 10-day drill at the same time russian forces are massing on ukraine's border. in both cases russia sought to intimidate. the drawdown of nato forces in afghanistan will reduce the energy security of the baby giants. they will be more vulnerable to flows of narcotics and battle hardened extremists. it will reduce coalition logistics support from central asia and therefore associated revenues. in early 2012, during a blockage of shipments through pakistan, 85% of coalition supplies traversed the former soviet union on the way to afghanistan. now percentages and volume always are far lower. the fate of iran could become a forth source of strategic shift. iran has swap arrangements with the three baby giants but they would like to ship more energy to and through iran.
if iran were to reach a nuclear accord that led to reduced international sanctions export options for the baby giants would improve. new extraction technologies may create a fifth strategic shift by diminishing the relative contribution to world energy supplies of azerbaijan, kazakhstan and turkmenistan. illiberal governments and massive corruption characterized the three baby giants since their emergence as independent states 22 years ago. the countries may remain politically stable but the gap between realities and expectations might be rising especially among the younger and better informed. if a social or political explosion were to emerge, this could affect the strategic context for energy development. what might these six potential strategic shifts mean for the region and for the west?
as jan and julie point out in the book there is need for quote, stable balance among neighboring powers, end quote. azerbaijan and kazakhstan and perhaps turkmenistan will want the west to remain engaged in their region. this will help them assure a stable balance among the two neighboring great powers. the west could help them fill the security vacuum that will emerge as coalition troops withdraw from afghanistan. energy alone will guaranty a degree of western support for the independence and prosperity of the three baby giants. this however may not be enough. as europe and america retrench from some of their far-flung commitments they will concentrate their foreign policy energies increasing on countries making progress towards democracy and respect for human rights. we see this already in western support for ukraine and georgia. the main challenge ahead for the
three baby giants is to find better ways to couple energy wealth with more freedoms. this will help them build sustainable prosperity and a loyal citizenry that will resist internal and external threats and help the baby giants live at peace with their neighbors, even ones much more powerful. these countries should also try to offset adversities by improving their energy investment climates. according to the world bank's index of the ease of doing business kazahkstan is near top one-fourth of countries in the world and azerbaijan is in the top 1/3. the finally the west should realize the strength of its support for ukraine against russian aggression and its support for reforms in ukraine will send a positive and important signal to central asia and the south caucus sass. caulk cast sus.
a row bust economic sanctions on russia, will help deter moscow from coercing other neighbors. demonizing russia is not the right policy but deterring it is. thank you. >> thank you, bill. julian is director of russian and caspian program in inh energy. julia. >> thank you all for coming. what i would like to do spin this in the direction of what we focused quite a bit on shush that. to look how russia must be perceiving some developments not only between itself and ukraine but also broader region when you look at ivan and this whole problem of suddenly the
instability for countries that have sizable and oil and gas resources. for russia i think if you think about the u.s. unconventional energy boom, it is putting us on a path to overtaking russia to become the world's largest oil-producing nation. we're not there yet. russia produces 10.5 million barrels a day. it is the lead oil producer right now. but moscow has been seeking ways to maintain its competitive edge in both oil and gas production and in exports and really its relationship in this area with the u.s. that is important. oil and gas determine russia's economic and national security. i think that is important to keep in mind. you probably all heard the numbers that russia's oil and gas sector contributes about 70% of the country's total export revenues. 50% of its federal budget revenues, 40% of tax revenues. oil and gas contribute about a
third of russian gdp and high oil prices contribute significantly to gdp growth. so in order to underpin its ability to keep oil and gas well actually oil production at competitive levels with the u.s. there is this race for exploration in the arctic which is one of the areas that we've heard about. in order to basically develop the next generation of oil and gas projects in russia, russia will need the help of the international oil industry. and as a result, it is already lining up with some of the world's biggest corporations like exxonmobil, eni of italy norway's statoil. each which bring important political and commercial and technological inputs that are essential for russia today. i think while gas program dismissed the need for shale gas technology and its development
in russia one of the areas that is important in the discussion today is that neighboring ukraine has vast, unconventional gas resources and these resources are being targeted by again the international oil industry. shell sign ad production sharing agreement in eastern ukraine which is on hold right now. chevron has an agreement a production-sharing agreement in western ukraine for unconventional gas. and in a sense, i suppose if ukraine were to stablize you could see these projects moving forward. russia state oil company rosneft has been very supportive of the development of unconventional oil resources in russia and it has team up with exxonmobil. in may it teamed up with bp on a pilot project in the volga
urals, exxonmobil is in siberia. u.s. energy information estimated that russia's technically recoverable shale resources are 75 billion barrels of oil. the largest in the world the u.s. ranks second. so in a sense there's this energy competition between the u.s. and russia but for russia energy is also a lifeline for its economy. now that bring us backs to one of the subjects of today. given its proximity to russia, the e.u. has developed direct oil and gas pipeline links to its eastern neighbor. the level of russian dependence varies by countries in the e.u. but if you see which countries are most dependent on russian gas, it would be germany number one, is the largest importer from gazprom. there is austria and countries of eastern central europe are very dependent on russian gas. when you think about the new pipeline talked about for
russia, which would be involving ukraine to the extent that if the south stream gas pipeline were built would marginalize the need for ukraine's gas network. but the countries that are promoting the need for south stream are austria and latest one to sign up and countries of eastern central europe because they are very dependent on russian gas and their economies are hurt if gas supplies are cut. and in about half of the 28 e.u. member states russian gas accounts for more than 41% of their consumption. in the end i think what we need to look at as well, if we look at the e.u., i think for russia the european union e.u. 28, croatia is the latest member and turkey, they comprise its largest trading partner and they take the majority of russian gas exports with over 50% being shipped across ukraine.
and for gazprom europe is the largest of its three markets and it's going to try to hold on to this in terms of revenue and profit and you know, gazprom sells some gas of course in russia which is a very big market. it is the domestic market. countries of the former soviet union and it has started shipping some lng to asia but we can not forget europe is really the heart of gazprom's market for its gas. i think china will develop over time but, as a result i think what we need to keep in mind as this ukraine and russian relationship develops is that in any case one of the things that russia will look at, whatever happens is that it is determined to build maintain the relationships it has in europe as we've seen. it wants to build a new pipeline into europe and it will continue to try and not only
hold on to its current gas share in europe but to build the share up because europe, it has determined in the future will probably need more russian gas. thank you. >> thank you very much, julia. i will move to the podium to moderate our discussion and thus vacate a spot for the ambassador who i think will join us shortly. so think of your questions. who has questions? yes. right there. identify the name and institution for the panel. >> hi. nye name is -- [inaudible] just visiting here. so the discussions about energy in ukraine supposedly but i heard a lot about russia but as
far as ukraine is concerned there was modernization that was used. i heard that ukrainian ukrainian economy is 2 1/2 more inefficient than russian. so isn't there a lot of space to improve the energy consumption in ukraine so it is much less dependent on russia's gas and well, any comments on this? >> who wants to talk about energy efficiency? go ahead. >> i can take a first stab. getting prices right in ukraine is step one. you can put seven or eight other countries in that category of the in a system where everyone's electricity and gas prices are subsidized, you have demand which is far higher than it need be otherwise. you need governments to change that system and you only don't subsidize the poor and subsidize
everybody is very difficult to do and requires creating a subsidy system that targets people. that worked for world bank and imf. that is diplomatic work for the u.s. and leverage we're trying to give to ukraine to promote those kind of reforms. until you do that, you have countries, companies like shell and chevron that want to develop shale bass in ukraine who they hope can export to countries that can make market price. only when you get internal reform in ukraine that the domestic market will be attractive. there is lot of work to be done. absolutely you can do more on energy efficiency and pricing but no one will invest in energy efficiency unless you save money on electricity bill to to invest higher technologies better windows or thermostat, until you pay the for the electricity you're consuming you don't have a price signal.
and that is important to do. >> i might add a comment here there's a real problem and challenge in terms of the timing of these issues. when you talk about shale gas development in ukraine, and i hope that there will be plenty available pause if to the extent there is the development of resources also a little bit on the offshore side perhaps that will make it possible for ukraine to have a more, a less dependent policy on other countries. but, in order to get to that point, this is, this is not something you should do overnight. something that requires years of development, exploration development and production. so the question is, how do you build that bridge from where ukraine is presently which is highly dependent on external sources to one that is less dependent. here is where i think the e.u. really has to step up because there is the possibility of using the pipes that have been
taking the gas in, more for european consumption and been making that gas available to ukraine. where does the u.s. come in? if we have a more liberal export policy as david is pointing out including exporting lng and obviously that wouldn't go to ukraine directly but it would be going to europe. that requires rigasification facilities in europe. that is an investment. in turn you are able to back in more immediately available gas to the european area which in return will make it possible for europe to be more responsive in this bridge, this time bridge to ukrainian requirements. so how do you justify this in your own mind? obviously all of this is money right? it is not something that is a free good. i believe it is very important to focus public debate on the investment required to have a
safer and more secure neighborhood european neighborhood in which ukraine plays a key role. and, you know, i don't mind the advocacy on national security ground for taking steps to ramp up the rigasification to pending time that might be more available in ukraine's space and certainly won't cover all of ukraine's requirements. very important thing to focus on. i was reminded of that because of the last time that, poroshenko's predecessor was about to sign that european deal, you remember that? there was a $20 billion factor and putin immediately stepped up
and said, we'll give you $20 billion in credits and we'll reduce the gas prices overnight. meantime we were suck our thumb i'm sorry to say, figuratively about this. when you think about $20 billion compare that to at least two trillion and looks like almost four trillion we've spent on iraq and afghanistan you have to wonder about our sense of proportion in terms of our national security strategy. in $20 billion of investment in the security of europe in my mind is lot more important than the number of expenditures we've had to make because of an ill-conceived iraq policy. and we really have to get into this debate about making the right invests for the right things and not throwing money at the wrong things. i think ukraine is -- of that action. >> subsidies in ukraine of energy have been up to 40% of
purchase price. that is one of the most, if not the most energy inefficient economy in the world in the past. at the heart of the imf program which ukraine is now implementing are reductions in energy subsidies as well as eliminating the overvalued exchange rate. a key internal political issue for ukraine is that some of energy intensive industries in eastern ukraine at realistic market prices for energy will be negative value added producing companies. how the government deals with that economic challenge at the same time it has a security challenge in eastern ukraine will be, will be very interesting to see. of course you have seen prime minister yatsunuk refer to his interim government as kamikaze government because in fact he was planning to implement tough energy price realism.
>> let me ask all of you a question about the region on more broadly. seems here in the united states, north america we've been fortunate in many ways. one way despite our various adventures in the middle east we haven't had to think of energy con chum and production largely in geopolitical or geostrategic terms. it just hasn't had to be a part of our national mindset of energy. yet in the region we're talking about overwhelmingly clear it is vital and essential. there doesn't seem to be connective tissue between points of consumption decisions you were talking about and for example, politics. your cross-section of ukrainian is not necessarily picturing vladmir putin when deciding how much gas to use how efficient windows to put in their apartment, et cetera. that is just on the efficiency side. you could scale all the way up to oligarch level production throughout ukraine.
there are other economies too where their hand is actually strengthened by increasing energy dependency of neighboring countries and so on. how, what is the smart way to have a region-wide conversation that actually does connect the dots for not just ordinary people, but people at the point of the tap and the spigot and investment decisions operationally about energy with the geopolitics so these things don't continue to exist somehow in relationship to each other but divorced? i don't know if that questions makes sense. thoughts? >> well, a quick comment. read frank's chapter in our book here. nice way of advertising the book, which talks about the politics of energy and how difficult it is, how very challenging it is and you know, there's no easy answer to the very good question that matt puts but it seems to me that when you think of assistance to
ukraine, and i think people are in the mood to talk about that, even despite the general anti-assistance atmosphere, certainly in the european context and i would hope also in the u.s. context i think it is well worth making an investment in in inducements, for example for energy efficiency. here in this country the power companies with the encouragement of the states are inducing us to in fact cut back on our energy consumption for a very good reason. they don't have to build more power plants which are very expensive. well similarly if we can build in, and i know that david had a lot to do with that thinking when he was in the state department, build into your assistance program as well as our energy strategy the idea that an investment,
multilateral european-u.s. in helping ukraine cut out those subsidies and reducing the pain of those of that cutout so just not ukrainian burden, that's a far better investment i think than many other things as i was trying to suggest earlier, that we throw our money around at, because it has intrinsically so much to do with the course of the country in ukraine and as ukraine becomes more sort of market-oriented and based it becomes more resilient both internally and in terms of its relationship with the countries around it. >> i have to agree with jan. politics are really hard in europe. it is probably a mistake to call it region and europeanwide solution. western europe has different economic interests than central
east european states and they're not going to change. just like frank's chapter here, it is hard enough in our country but you ever the strategic interest of the country and you have economic interests of entrenched interests. i think the other challenge you have you need a bridge. if you go to bulgaria, you were ambassador in bulgaria, you say we have indigenous gas and we'll bring you alternatives, their answer is yeah, for the next nine years what are we going to do when gazprom cuts off our gas? you have to have some interim solution country by country. for the u.s. we have to look more bilaterally. but for the e.u. the question is, are they going to look at that broad interests that you have identified and act on it or will it be the lowest common denominator as we have seen? it is hard to bank on that changing but it is only if we see the european union take on that strategic interest and make hard political choices like, being able to move gas from spain all the way to ukraine, to
break some of these these gazprom interests. that is a germany problem. that is a u.k. problem, that is a brussels problem. that's a big lift. so i think that would be the answer to your question. the e.u. would have to lead those changes and drive the countries to it but i think for the u.s. we can't expect that is going to happen and we have to work in smaller bites. >> right. by the way there are still going to be countries i would imagine john like bulgaria will be pr battleground, political battleground where the other parts of this region that have disparate interests will invest in lobbying the opposite way right? i mean they're doing that to some extent now i guess. >> yes. it's energy policy is a hard sell. domestically it is hard to get people interested. at one level at another level you're talking in the united states about a very, very simple equation that most people can understand. we want our country to be less dependent on foreign sources of
energy and the europeans can kind of condense it all into, we want to be more diversified and less dependent on gas in particular coming from the east. it would seem to me that with some enlightened leadership, both in brussels and in washington we could put those two imperatives together today that would help the united states help europeans. i take your point david europeans, we need to differentiate a bit between the bulgarians and the germans but if we were to, let's say convene a summit which we set a goal of helping the europeans reduce their gas dependence on russia by 25% in the next two to three years i think that would get moskow's attention. it would certainly answer our own and european interests. and interestingly i think a lot of people in russia would applaud that as well because
many of the russian economists, and especially economists i talk to say, only that kind of competition is really going to force the russian economy and russian energy sector to diversify itself and especially to modernize in a way that makes it a more efficient producer in the end. >> i think one of the thinks to keep in mind, european has majority of dependence on pipeline gas and the pipeline gas is dominated by russian gas and those ties are going to be very difficult to break, when you think gazprom has about 617 bcm of gas it could produce. it is producing under 500 right now. there is just this enormous quantity of gas in russia that really should be oriented to european markets. so i guess. the question really for the future to some degree in europe yes lng will be option of some magnitude is how can
you get a cooperative relationship that works better? because 20 years from now, i think what you may find is that the other pipeline forces are going to be diminishing. the one that is left really the russian source of pipeline gas. that is not going to go away. so i don't know how you get from here to there but eventually there has to be a solution because that is where the resources are. >> question here. please wait for the microphone. and introduce yourself. >> my name is elaine. i'm a russian-ukrainian american. so i am ex-ukrainian speaks russia and born in germany and has relatives all over the united states and russia and ukraine and many other european countries. so with globalization of the world, the energy is, having a different, a different meaning for me especially because my
family is so multinational. and, right now we all talk about the strategy for the energy sector and we talk about that yes ukraine can do shale gas fracking which we like, don't like here in the united states. in some countries in europe, we say, okay, we will deliver more energy to the european union. however, when i speak to my relatives in ukraine they're worried about winter coming. the utility bills go up. what is your opinion on long-term strategy for ukrainians? and how valuable is the situation of mr. poroshenko right now? if he can not hold on the prices for utility bills and people go into winter and winter in ukraine, believe me, is very, very cold, without a clear policy what happens to the
general population, ukraine will not survive this winter. so what is your opinion and how do you think the situation can be solved in -- >> very short term, are we going to see another winter gas war? bill? >> let me broaden it beyond gas war. if ukraine does not make the energy efficiency changes that the imf is demanding it will lose western support. it is as simple as that. ukraine is broke. it has no option to continue subsidizing the price of energy and price of gas in ukraine up to 40% or 25% or whatever. there is going to be short-term adjustment. it will be tough in ukraine there is no getting around that. the most important thing for ukraine is start becoming more efficient in use of energy, consume less of it. that will improve its market power relative to russia. it will reduce potential debt it has to russia and get energy at an efficient market price for
the future. then ukraine can take advantage of other economic reforms because only with market prices for energy will investors have a good idea what kinds of investments in industry and agriculture and makes what kinds do not. it will be tough in the short-term but liberalizing the economy and bringing a market price for gas are essential. >> we still need to put a finer point on tough in the short term. i think if i understood the question right the leverage equation changes dramatically, the political leverage changes dramatically when people have to heat their homes. >> that's right. ukraine could survive a shut off of russian gas up to september and it is not true for the winter. diplomatically you need to avoid a shutoff of flows and you need to make sure storage is full and you maximize what you can bring in. no there is no short-term alternative. you couldn't bring enough goal
coal or oil to heat ukraine. >> frack something longer term. >> fracking is longer term. >> could i add to that the short-term alternative is not there for russia either. russia needs ukraine. 84 bcm of gas last year moved across ukraine of 161 that was consumed by europe 28 members and turkey. russia also needs ukraine. my impression there will be some sort of agreement on the price. i mean this pricing issue is up for debate right now and russia has cut supplies to ukraine but there has to be an agreement for russia as well. so short term i think for ukraine the issue is that there's a need on both sides to find a solution and that there has to be gas this winter. i agree with you. and if, you know there isn't gas flowing across ukraine into europe, then that is issue with the european union i think
russia wants to avoid having, any sort of gas cutoff in the winter. >> i would add to that, even though i'm not a great sanctions fan, i am very much struck by the impact of targeted sanctions. at a time that the russian economy is gdp growth is going down to one or less percent and before it was in the 7% range the economic consequences of being totally antagonistic, i think are becoming clearer and i think that's having impact on putin and his circle in terms of how they view this. secondly, there is an opportunity as i tried to make the point in my opening of a longer term view in which you take another look at shared ownership of trunk pipeline in
ukraine. it was tried before under very different circumstances. but if the possibility is there for the e.u. to, and ukraine and russia to have shared ownership with the golden share and the decision-making voice being ukraine's that could be incentive for shorter-term approach in terms of pricing. after all, pricing of gas for ukraine has always been politically driven in russia. they were doing everything they could to force the ukraine into eurasian union. that failed. ukraine now is moving in another direction. the question is, how can you keep up, as much of a relationship with ukraine in these different circumstances? well the way to do that perhaps is to talk to, use the prospect of longer-term cooperation in a way that that induces russia to
even forgive some of the debt that ukraine owns, owes russia for past gas consumed as part of a deal involving shared equity approaches to the trunk pipeline. it requires a different political environment to start doing this but i think each side is beginning to recognize the limits of a zero sum strategy here, and what we need to do i think as a policy matter is to come up with ideas like this, that show that there are plus plus solutions that are far better than, you know, continuing this mindless violence in the east of ukraine and, antagonizing the west to the extent that sanctions will be invoked. all of this can be made into a strategy. how you get public support and congressional understanding that is beyond my my -- i don't
know. i do know much more progress can be made strategically if we approach this in the right way. >> jan you weren't kidding when you said you were an optimist earlier. the gentleman in over there. >> realistic optimist. >> i will give you that. >> ron davis former state department. over the past 15 years gazprom has invested in eu companies gas systems. has a lot of sub skid airies in the e.u. countries. could you comment on how that factors into this whole matter of reducing dependence, eu dependence on russian gas. >> ukraine and europe. >> let me, a couple of things. i guess the e.u. antitrust policy would end russia both supplier and owner of the
downstream transportation infrastructure needs to be enforced and forcefully. you're right as long as gazprom directly or indirectly controls transportation in europe, then then it is going to make it harder for these european countries dependent on those flows to resist them and give them more leverage. it is the case now. europe bans destination clauses. theoretically you should be able to sell russian gas anywhere you want. that the russia has interest in the europe pipeline and other pipelines means you can't really move that gas unless gazprom says so. so that impedes the ability ultimately to move, reverse flow natural gas from anywhere else from the border of spain or any place else you can get it into europe where you want it to go. that is really the crux of it. they not only need to reverse some ownership that is there but they have to make sure it doesn't go forward. you're right, they have a choke hold. it is just not very visible. >> could i just make a quick
comment on that? you know we all have this view of this gigantic state within the state gazprom which can do other things to other people. in the spirit of realistic optimism, let me point out in russia itself there is increased competition over gas. rosneft is moving into the gas territory. novatek is there. they have all very close associations with putin. if anything i think putin is a little bit fed up with the dysfunctionality of gazprom. so point one. point two gazprom says, well, if you don't want to have our gas we'll give it over to the asian side and walk off from europe and horrible things will happen. well, if you take a look at the asian theater, it is heavily subscribed by qatar australia potentially western coast of
canada, if the u.s. gets its act together ourselves. the idea that the russians simply shift their gas over to the east, or that this deal with china has all of the price issues resolved, you notice the one thing that was kept secret was pricing. and i think it must be pretty obvious to us why that is because chinese are not going to pay the russians the kind of prices that the ukrainians or anybody else have paid. that's ridiculous. so the room for manuever of gazprom i think has always been overstated in the debate and the degree of competition over gas control in russia is increasing. those are strategic opportunities and we ought to get our act together here a little bit and think how we help ukraine, how we can influence russia how e.u. can be put into the act in a way that is of benefit. think about again, i apologize
to those that think it is idealistic, but there is a plus-plus solution which is far better where we are right now. won't satisfy everybody but far better than what we have now. >> gentleman in the white shirt yellow tie. wait for the mic please. >> thank you. my name is kovar prosper faculty member at district of columbia. my question, we talk about congressional support and we talk about this lack of congress understanding what is happening with russia. we talked around it. so what would that look like? what would congressional support look like in the current state for ukraine and russia and what could we do and talk to our representatives how to have that conversation? >> john, seems like your wheel house. >> i think on the ukrainian side it would take the form of congressional willingness to pass a special appropriation for
ukraine to help with some of these economic problems we described. it would send a signal to russia moskow, especially people of ukraine that we're putting our money where our mouth is. with regard to russia, i think there is really a dearth of any contact between the russian duma and u.s. congress, between the senate and the russian federation council. the number of contacts that used to be 10, 15 per year have dwindled to almost zero now. we need to work much harder on our side to try to re-establish the links between the leaders on, in the parliaments in both countries and the staff especially the staff to help dispel some of these mythologies that really do nothing to foster a better understanding or better policy making towards each other in the absence of that you get
laws in russia banning the adoption of russian orphans by americans or you get the magnitsky law in the united states however well-intentioned it might have been was a net negative in terms of u.s.-russia relations. >> well, we've we're very fortunate to have been joined by ambassador carlos pascual the international energy coordinator and head of the bureau of energy and natural resources at the state department. also former u.s. ambassador to ukraine, bill miller in the room. also former u.s. ambassador, i don't know if there are any others but we're certainly well-represented here for state department regional hands and former u.s. ambassador to mexico. carlos, just to give you an overview we of course talked about the impact of the crisis in ukraine. ukraine-russia relations the acute challenge may come this winter when the bargaining positions get very tough. we talked to ambassador beyrle
talked about how different the relationship twine russia and the west is now because of depth of economic ties and fact those are being used in the context of a political crisis. we talked of course more broadly about the region including the sort of southern belt of small giants, little giants i guess bill courtney called them. >> baby giants. >> as per buy january -- azerbaijan kazakhstan and turkmenistan. i like to give you a few minutes to talk about your perspective and we have time for a few questions before we wrap up. >> thank you. my apologies i could not be with you throughout the entire discussion. i'm glad i was able to join. i was going to join at the lunch and jan twisted my arm and asked me if i would come on a few minutes beforehand. thank you for my tolerating jumping in at the last minute and all are good friends and colleagues.
i think one of the starting points we have to look at this issue from is the radical change that's happened in the european gas market because as you look at the tensions between russia and ukraine you can't take that out of a wider context what's happened in europe. so after the last gas crisis between russia and ukraine in 2009 europe has taken some extraordinary steps to put in place a much more competitive gas market. it put in market rules under the third energy package so not one single company could own the gas, own the transit systems and own the distribution systems. in effect it has begun to enforce a competitive environment. it has taken away a small thing called destination clauses which has huge impact. previously when a country bought gas, for example germany or gas, it would have to get permission from gazprom to export that gas. the e.u. made that illegal in the european market.
once germany get the gas they can sell it to whomever they want to. that is absolutely critical of whole concept of reverse flows going back to ukraine. europe also put in place very extensive infrastructure investments that are still not complete. countries like bulgaria are not part of the network. you can physically move gas west to east, north to south, in ways you previously could not. they have made massive invests in regasification facilities. the other big impact we've seen in the marketplace is caused by the united states. the united states now is producing much more gas than was ever envies saninged. we increased natural gas production by 35% over the last five years. as a result of that we're importing about 5 bcm. billion cubic mighters of lng a year but it was previously envisaged we would import 80. particularly in 2011 and 2012 a
lot of supplies were redirected toward the european market. those changes increased availability of supply, the infrastructure, the policy changes, have allowed every single major western european utility to renegotiate their contracts with gazprom to lower the price and extend the financing terms principally in 2011 and 2012 when that took place. the reason that is so critical is the importance of that market power has created in the european context. and the critical objective for ukraine is to be brought into that community of european energy european energy so they are part of the strength of a community of 400 million consumers and not just left alone. if they can be part of those rules and be treated in the same way as that market is treated they are in a much stronger position than they are otherwise. that has been the foundation of where we've been trying to move. one of the things that we just
got a note about energy in ukraine it is at heart of economic and politics since independence, right, bill? who controlled gas system and money won elections. that is reality of the past. one of the things of this government is change that and cut a link to the past and bring greater transparency to the energy system and bring greater efficiency to the system that ukraine consumes three times energy than production of unit of gdp than any other country in europe. what are we trying to do? let me give you a perspective. let me run over numbers. apologies if you done this already or just stop me. ukraine consumes 50 cubic meters of gas every year. 28 comes from russia. they produce about 20 and get two in so-called reverse flows. in effect using the european
market that takes advantage of limited pipeline capacity that currently exists to move gas in a sense backwards through the system, from poland and hungary. and so one of the challenges is how to work with ukraine to be able to change that equation in order to create greater energy security. so in the short term one of the things that we've been working on is expanding those two billion cubic meters of gas to something that could be much larger. poland is at a maximum level of about a rate of 1 1/2 billion cubic meters a year. hungary could be 6.1 billion cubic meters a year. they're currently at just about three. they recently increased a little bit. we're working with both the ukrainians hungarians and gas suppliers to try to understand how they might be able to take that further. slovakia has not had an interconnection but they have recently reached an agreement with ukraine to complete the
building a physical interconnection that would al 3 billion cubic meters, 3.2 billion call big meters to flow starting in september and that could be expanded with compression to between eight to 10 billion cubic meters a year. so in effect if you take those possibilities, what it means by the end of 2014 more or less ukraine could potentially have 5 billion cubic meters of gas when you take into account amount of time it is available to flow. by the end of next heating system which would be april 1st of next year, they would have an additional 10 billion cubic meters or total of 10 billion cubic meters of gas that would become available to them through these reverse flow mechanisms. the other critical thing to look at is storage. right now ukraine has 14 billion cubic meters of gas in storage. they have to keep five in the system and not use to maintain the structural integrity of their wells. there is a potential for them to
build that up a little bit more because right now in the summer they're producing more than they're consuming. they're bringing some in from reverse flows. so if you take that into account, ukraine potentially sufficient gas between reverse flows, production and storage to keep them in reasonable shape till about december. and that becomes the timeline in which they have to reach this agreement with russia in order to be able to restart gas flows. the sooner that they do it the better. one of the reasons that it is important for ukraine to be able to do it is that there's a limitation on the size of the pipeline that can actually move gas from russia to the west. and so at a certain.during winder when russia is consuming europe is consuming ukraine is consuming, if there aren't already prepositioned supplies in ukraine you will end up with gas shortages right? you have to have a certain almost already there.
look at what this could be like in a year if there is some measures taken on energy efficiency. ukraine continues to produce at 20 billion cubic meters. they have 10 billion cubic meeters in reverse flows. so at 30 billion cubic meters. they reduce consumption by about five. then they're in a position where the amount that they would have to import from russia would be decreased to say 15 billion cubic meters as opposed to the 28 that they're doing right now. that becomes a realistic a doable scenario. there are at love things that have to happen to make it possible. what is really interesting if you look out a decade. there what we see is that first ukraine has signed production-sharing contracts with shell and chevron. it has extensive shale gas capabilities. it also has great capabilities from the redevelopment of existing wells where they can produce more conventional gas
from fields that have stopped producing. they have been using the same seven yet technology since the 1970s. with those changes in technologies realistically ukraine could double its production of gas to a range of 40 to 45 billion cubic meters in the course of a decade. it could expand its reverse flow capabilities. 10 is the minimum that it could do without trying really hard. it could potentially bring that up to 15. just between those two things, production and reverse flows ukraine could be in the position of producing or having access to 50 to 60 billion cubic meters of gas. remember its total consumption right now is 50. if it puts in place energy efficiency measures, depending on how efficiency balances off with future economic growth, you crain realistic i -- ukraine realistically could be in a position within a decade it could make a choice whether it imports gas from russia. if it is commercially
advantageous for it do so it can and if it's not it won't. so part of what we're doing is not only trying to help ukraine work through these short-term scenarios but be able to put in place the mechanisms that are going to allow it to work with private investors to be able to boost its production over time. that is something that the united states is engaged in working with the ebrd, the european union the ifc is interested. the world bank has been another important player. so all of us are engaged in that process. the final thing i just wanted to say is on the negotiation process between russia and ukraine. and here the e.u. really has been absolutely critical. i think they have done an outstanding job. they have been lead by the european energy commissioner. essentially the approach that the e.u. has taken is to say that we have tried to create a competitive gas market in
europe. we are extending that gas market and rules of that gas market to ukraine which is part of the european energy community. as part of that gas market there are a few basic things you have to do. one you abide by market prices. so the e.u. put on the table a proposal that gave a number of options of what prevailing market prices would be. the second piece of that is if you buy the gas you can trade it. so that there's a freedom to trade and have reverse flows something that gazprom has contested but the e.u. has supported. and the third is that if you consume the gas you have to pay your debts. and here ukraine has faced a real problem because they have significant buildup of debts to gazprom but what they have also agreed in a proposal that the e.u. put on the table they would immediately make payments if in fact there was a package agreement around all of these efforts. russia walked away from that
proposed agreement for one basic reason. i think. there were issues that were related to price. there were issues that related to debt but what was really a sticking point was the ukrainians and e.u. sported them on this, said they needed a mutually agreed contract that was not simply a russian adjustment to an earlier negotiated contract where russia decides to give a discount. what is the reason for that? well the prevailing earlier contract is from 2009 during the period of -- the earlier discount was for the black see fleet. . .
jan and i have negotiated. what we have decided to do is take one round of several questions, and then give the panel a chance to very briefly close, and then we hope we won't run too far over. there was -- right there. >> teresa, national war college. i wanted to ask a question about the storage. ambassador pascual you noted that there's 14 billion cubic meters in ukraine right now. as far as i know, their storage capacity is 30 billion. i want to understand the ownership of that storage. does -- is there a transparency problem? is there a part russian ownership problem? in what sense is the storage in ukraine usable, and in what sense does it continue to be county. >> okay. and right there. >> thank you. i'm from russia. what are the u.s. policy goals
in the energy field in ukraine, and what are the instruments to achieve those goals? my question is for ambassador pascual and others who want to comment. because we've been talking about anything, about managing ukrainian affairs managing european affairs but not about u.s. interests. so that's my focus. and then secondly just technically, ambassador, i listened very intensively to your presentation, i still do not understand. do you support the ukrainians paying their debts to russia? because everybody agree around this table that they do not have any other short-term options before this coming winter. other than restoring the flow of the gas if it's interrupted. >> okay. >> and that demands debt payment. thank you. >> and last question right here. >> david goldwyn spoke about pop gating natural gas -- >> your name affiliation. >> my name's mariah blake, i'm
with mother jones. pop a gating unconventional natural gas production in other countries, and i'm wondering what has been done on this front so far, whether the united states is stepping up these efforts in light of the cry ice in concern crisis in crimea, and there was also i believe he said not enough was being done on this front, what more would he like to see be done on this front. >> okay. great. why don't we just go from here down to carlos. is that, does that work for you jan? >> yeah, although we don't -- i think most of them are for carlos. >> defer from one ambassador to another. >> okay, on storage, you're correct, ukraine has 30 billion meters of capacity. that is gas which is within ukraine's ownership.
whether there are specific entities within ukraine who own portions of that gas is not completely clear. that's one of the things that still needs to be confirmed. but one of the things that has been a great step forward is that the european union maintains a system for realtime reporting of gas stores of gas movements and gas supplies. ukraine is thousand participating in that. -- now participating in that. they're posting it online on a weekly basis they're not doing it daily but that has been a very important step forward in actually promoting transparency about what gas stores they have available. so we have a pretty good feel for what they have to work with. in terms of what u.s. policy goals are in ukraine, i think they're really goals that are almost universal, which is to be able to see within ukraine and within europe an environment for the development of natural resources and the consumption of national resources which happens in a context of competition and diversification of supplies. that's good for consumers, to
have that kind of competitive environment. all of us seek to have multiple suppliers to satisfy our energy needs, that's a source of greater energy security. we want to be able to have an environment that allows us to develop our own energy resources, and creating the right kind of environment that attracts private investment to the that because that is absolutely key, it is fundamental. and it's those basic things that have been at the heart of u.s. policy, and they're not that different from the way we would explain the way that we would deal with other countries throughout the world. in terms of ukraine paying its debt, i think more important than what the united states thinks is that ukraine has said it should pay its debt. and the negotiations that they had with russia one part of that proposed agreement was that the day after the package was agreed to is that ukraine would make a payment of $1 billion. and the critical issue here is that ukraine has put on the table and the e.u. has been supportive of this is that you should have a package
arrangement that deals with the whole set of issues. what's the price of gas going to be in the future, how do you handle debt, what are the rights in arbitration and everybody should have that and have it transparent so that the week the following week that you don't just get into another dispute over another issue, and you really have a foundation to be able to move forward. i'll just say one thing about natural gas in the region, but david goldwyn started a program called the shale gas technical exchange program. it's now focused on unvex algas. -- unconventional gas. the united states has been engaged with many countries throughout the region to exchange best practices on the development of shale and on convention algas resources. the final thing i just want to say is the importance of recognizing that the issues that we're dealing with here on energy fundamentally involve both fundamentally involve
commercial players and private players making investments on the basis of what they think is going to be commercially viable and sustainable. and so what we all need to try to do is to work together to help the countries that are involved in these disputes to be able to create an environment that allows commercially-sound decisions to be reached that are in the economic interest of all of the countries and not have geopolitical factors and influence be the driving factors of those commercial arrangements. the foundation for those arrangements really needs to be what makes commercial sense, and that's one of the things that we're trying to get to. >> thank you. >> i think i'll defer to david, because it's really the shale gas question that's the next. yeah. >> thanks for the question. actually, i said i thought that the u.s. was, i understand stepping up its support for ukraine. but in ukraine and all these countries, really the point of what was then the global shale gas initiative, now the
unconventional gas technology exchange program is for our government to help other governments learn how to regulate properly. the real challenge in most of these countries other than what is the local benefit, are the governments sharing the revenues in a way that will help local development, is how do do you get regulators comfortable that they can protect groundwater, that they can mediate between agriculture and the locality, that they can avoid seismicity issues and that's are intro to regulation. it's also leveraging all the things we've learned in the last three years about the need to require baseline testing of water, baseline testing of emissions, distance to aquifers setbacks disclosure. all these things which we learned kind of the hard way need to be the starting point for these european cups. but while they -- countries. but i think the conversation in the european union and the conversation between the united states and the european union ought to move from the whether we should do this to the how we
should do this. and i think there's just a discomfort sometimes, you know with u.s. policy not really at the state department with ambassador pascual's program, but it's this discomfort with how do we support development of gas at the same time we're promoting a climate change agenda? you can do both especially if you're backing out coal safely. i think i'd like to see us do more because i'd like to see europe do more. ultimately, you can only get so much lng in these countries that you're going to be relying on russian gas until they get to the renewable future for us and for them is probably a decade off. gas is the bridge, and they need to build it quickly. >> great. we're so far over time, maybe if there are any final burning comments, we can take them otherwise i think, wrap up? jan? >> well, i just endorse very much the idea of a package giving incentives to develop both short-term and longer-term approaches. and one of the things here to keep in mind is that competition
is not only a matter of the european space but there's more and more competition in the russian space. a point that i made earlier about how novatech and gas prom are competing themselves, so the notion of encouraging a market-based approach should not be dismissed out of hand. the critical challenge is to develop a political environment in which a stabilization of the crisis in ukraine makes it possible to talk sensibly again about how it's in the economic interest not just of the west but frankly, of the east to adopt these approaches. everybody will be better off. and i think that's the opportunity. through crisis, you get to an opportunity. >> well let's thank our panelists for this fantastic discussion and all of you -- [applause]
speech on the internet. this is about an hour. >> ladies and gentlemen, welcome to the national constitution center. i am jeffery rosen, the president of this wonderful institution. the national constitution center is the only institution in america chartered by congress to disseminate information about the u.s. constitution on a nonpartisan basis. it's a precious role we take it very seriously and we're grateful for it. and the program tonight is part of our role as america's town hall. this is the one place in the country where citizens of diverse constitutional perspectives can hear the best arguments on the constitutional questions that transfix america, are in the news, and siff fuse our history and make up your own minds. we're talking about the most
timely question imaginable the question of free speech in america. just this morning the supreme court heard important arguments on a case that will decide whether corporations have the same religious liberties under the first amendment as natural persons. and we're going to discuss that and many, many other questions. i want to ask you to look at our website, constitution center.org for upcoming programs. on thursday alan desh wits will come to discuss his life in the law. we have senator jim demint, lynn cheney and justice stevens in one of his few appearances. and i'm also especially excited that tonight we are presenting this with the foundation for individual rights and education, or fire. fire's mission is to defend and sustain individual rights including freedom of speech, legal equality, due process religious liberty, and sanctity
of conscience at america's colleges and universities. it is one of my first weeks on the job that greg came to me and said we should present a panel on the future of free speech and we've assembled the dream team of free speech. this is the ideologically diverse panel. broadly i think you may find that two of our panelists may be more ardent in their defense of the traditional america american free speech position, than others but i'm not going to tell you which ones and we're going to expect them to defeat -- >> we'll know. >> maybe we'll change our minds after listening to each other. let me briefly introduce them to you and then we'll get right to it. dr. stanley fish, professor of law at cor dozea law school, known to us as contributedor to the opinionator log for the "new york times." greg lucianof is the president,
member of the bar of the u.s. supreme court and author of unlearning liberty, campus crensorship and the end of american debate. please get it after the show. my old friend and coclerk eric pose anywhere, kirkland and ellis distinguished professor of law fellow of american academy of arts and sciences and prolific commentator on constitutional law and attitudes toward free speech. finally my old old friend it is such a joy to welcome you. we go way back in washington, d.c. jonathan is the most prominent and important defender of gay marriage in this country as well as one of the most persuasive and eloquent defenders of free speech and his reasoned and calm voice expressed in this beautiful
book which has been recently reissued in paper bark and in other works and in many articles has greatly enriched public debate. so welcome to the national constitution center. i'm going to begin with jauntsen. yesterday the supreme court delayed a decision about whether to hear a very important case. it raise it is question whether a photographer can refuse to photograph gay weddings because of her religious objections. and claimed that religiously motivated individuals can refuse to serve gay people, perform in gay marriages are popping up with increasing frequency. the biggest theme of your recent writing, and in fact you have a new afterwards has been it is good for gay people. that a regime that allows hate speech is good for minorities in general. do these recent cases cause you to reexamine that thesis? >> no, they don't.
i am not the best person to comment on the legalities of these cases. i don't know the case laufment but let me give you a personal perspective on how i think about these cases. there's a bunch of these cases and they all involved one way or another the clash of religious conscience with ant and there is a case in colorado now, a christian dog walking -- that fired a customer -- they said, your dogs get out of here, we won't walk them anymore. this is not the kind of society i want to live in. the right answer to this is sensible